The Digital Chamber Sues Illinois to Halt Digital Asset Tax

Blockchain industry organization The Digital Chamber filed a lawsuit Tuesday (July 21) asking the court to halt the state of Illinois’ planned tax on digital asset business activity.

The tax will harm The Digital Chamber’s members, who are already incurring costs as they try to comply with the new law before it takes effect in January 2027, the organization said in a Tuesday press release.

The lawsuit argues that the tax burden that is set to be imposed under the Digital Asset Tax Act included in the recently passed Illinois state budget is unfair. It claims the tax treats people differently based on how ownership is recorded or transferred, thereby discriminating against people who transact in digital assets; it is universally applied, regardless of whether the investor realizes a gain or whether ownership is transferred; and it affects all tech transactions, including potentially artificial intelligence and cloud-based transactions, according to the release.

“Today we are asking the courts to protect consumers and our members and stop this unfair tax in Illinois,” The Digital Chamber CEO Cody Carbone said in the release. “Taxes should be carefully considered, not only for the revenue they produce but for the fairness of those being taxed. That was not the case here, as the provision slipped into legislation the night before the bill’s final consideration.”

It was reported June 17 that the new tax law was passed as a provision to Illinois’ broader budget bill and that the provision was added at the last minute.

The tax takes effect on Jan. 1, 2027, and imposes a 0.2% tax on customers’ use of digital asset services, including exchange, transfer or custody activities.

The Crypto Council for Innovation said in June that no other state in the country has adopted a transaction-based tax like the one in Illinois; that Illinois does not impose such a tax on stocks, bonds or derivatives; and that the tax is “the most punitive digital asset tax in the country.”

Law firm Jones Day said in a commentary posted in June that with the tax on crypto set to become effective on Jan. 1, 2027, brokers with any Illinois exposure should prepare for registration now and review their recordkeeping.